Why forex traders tend to lose money...

Posted on 14th March 2016, by Moneycorp Dealer Team, moneycorp

Diminishing returns

More money

An engineer called Professor Peter Woodward says the HS2 rail track between London and Crewe will not be safe for high-speed trains. He says it should be laid on concrete instead of the gravel allowed for by the paltry £55.7bn budget. More money must be spent.

That was also the conclusion reached by the governing council of the European Central Bank on Thursday. Not only did the ECB cut its deposit rate from -0.3% to -0.4% and lower the refinancing rate to 0%, it said it would increase its money-printing asset purchases from €60bn to €80bn a month. Maybe the professor should have a word with the ECB: it could cover his shortfall simply by extending the programme for a month. Nobody would notice.

Investors did notice Thursday's announcement though: it was just that they didn't much of it, despite the new measures ticking just about every box on their checklist. They were sort of alright with it until the ECB president Mario Draghi said in his press conference that interest rates could fall no further. Given the current programme's lack of success (inflation has fallen from 0.7% to 0.3% since it was announced last January), investors were not convinced that another €20bn a month would be enough to get inflation back up to 2%.

Higher euro

Sig. Draghi was also fairly clear that the ECB is no longer trying to weaken the euro. Although it would doubtless prefer to see its currency at a lower level, the governing council is pinning its hopes now on pumping more money into the €Z economy. So up went the euro.

Since Thursday morning, a few hours before the ECB announcement, the euro has strengthened more than any other major currency. Granted, it has not risen far - one and three quarter US cents and half cent against sterling - but a stronger euro does nothing to help inflation towards its 2% target.

What it did do was carry sterling ahead in its wake. The pound is up by one and three quarter US cents from Thursday morning's levels and is firmer by an average of 0.4% against the other dozen most actively-traded currencies. Only the northern Scandinavian crowns (and of course the euro) did better.

Fewer data

Given the minimal impact of Friday's economic statistics, the lack of any today should not trouble investors. They missed the most interesting numbers on Saturday morning when China published its figures for retail sales, industrial production and urban investment.

The 10.2% annual increase in Chinese urban investment (construction and fixed assets) was slightly ahead of forecast but the 10.1% rise in retail sales fell short of predictions. The 5.4% increase in industrial production was also a disappointment, although it is sure to look better than the equivalent Euroland figure due this morning: 1.5% is penciled in there.

And that is the only ecostat on today's agenda. Tonight the Bank of Japan is expected to keep policy unchanged.

Is America’s Economy Shooting Blanks?


It always helps to make a good first impression, especially to the father of the girl you’d like to date. An impressive resume can do the trick. That was certainly the case in the 1997 dark humor classic Grosse Pointe Blank. If you don’t happen to recall the exchange between John Cusack’s character, Martin Q. Blank, and the father of the girl he wanted to date, here’s a refresher:

Mr. Newberry:

“What have you been doing with your life?”

Martin:

“Uh…professional killer.”

Mr. Newberry:

“Oh! Good for you, it’s a …growth industry.”

If only our economy had more growth industries. We’ve just learned that the economy grew by 1.4 percent in the final three months of last year. The sad thing is that’s a vast improvement over the last figure we had in hand of 1.0 percent. For the full year, the economy grew at a 2.4 percent rate, the same paltry pace it has since the recession ended in 2009.

As for the sole source of support of late? That would be the U.S. consumer, without which math tells us the entire world economy would be in recession, not just the United States. In the fourth quarter in particular, spending was buoyed by gains in Transportation and Recreational services.
Sound familiar? It should.

Cars have literally been driving the U.S. economy in the aftermath of the collapse in the energy industry which took high-paying jobs down with it. To be specific, car sales to marginal buyers who cannot afford the payment for very long have pushed car sales to record levels.

If you’re hoping this economic prop is sustainable, and you should be given the alternative, you’re apt to be disappointed. A recent Bloomberg story shed light on how sales have been turbocharged. As was the case with subprime mortgage lending which pushed homeownership to record levels, new car-financing entrants have been responsible for record car sales.

According to J.P. Morgan Chase calculations, among subprime lenders that tap the securitization market to in turn finance their operations, new entrants now account for 28 percent of the business, multiples of the single-digit market share they had between 2011 and 2013. That makes these corporate whippersnappers the biggest players in the market. Their secret weapon? That would be ridiculously lax underwriting standards to qualify unqualified buyers.

As was the case with subprime mortgages, it’s a great growth industry. That is, until it’s not. Investors keeping the lights on at these companies have apparently started to balk at the number of loans backing the securities they’re supposed to be lining up to buy going sour. According to Fitch Ratings, subprime delinquencies of 60 days or more hit 5.16 percent in February, a stone’s throw from the previous record of 5.96 percent in October 1996.

So you tell me. Can the pace of car sales that have been juicing U.S. consumer spending that’s supporting the world economy be sustained?

The answer would be yes if Corporate America was about to go on a hiring spree. The chances of that happening though are nil to none considering the latest Gross Domestic Product (GDP) data also revealed 2015 corporate profits dropping by the most since 2008 when the economy was veering into recession.

As for what’s to come, the February durable goods suggests more of the same, as in decelerating economic activity. Aside from being a mouthful, nondefense capital goods excluding aircraft orders feed into the GDP calculation. In February, these so-called “core capital goods” orders fell by 1.8 percent, capping a declining trend that’s been underway since the fall of 2014. Since peaking for the current cycle in September 2014, core capital goods have fallen by 9.0 percent.

And yet we continue to rack up job gains: Over the past six months, the economy has churned out 235,000 of them on average. So it’s apparently more of the dichotomous same – jobs up, economic growth down.

Morgan Stanley’s Ted Wieseman does a bang-up job of summing up this frustrating dynamic. “The jobs/GDP disparity results from the God-awful productivity record of the past five years,” Wieseman noted. Over that period, productivity has limped upwards at an 0.4-percent annualized rate.

“The only other five-year period that’s ever been worse was that through mid-1982, which included two recessions and the peak of the Great Inflation.”

In other words, the U.S. economy is desperately lacking in growth industries and will continue shooting blanks until that changes.


Danielle DiMartino Booth
Former Central Banker, newsletter provider, research analyst, contrarian

The Smell Of Dryer Powder In The Morning


Summary

Private equity insiders are faced with a forecast that calls for a perfect economic storm. There is, however, one mammoth impediment to private equity joining other would-be buyers who are now in self-imposed holding patterns: money, and lots of it.

In private equity parlance, this "money" is actually capital their limited partners (LPs) have committed to invest through funds that have been raised.

Pensions, tethered to unrealistic rate of return assumptions, will remain beholden to private equity investments until such time as they're allowed to revert to prudent portfolio allocations. The sad thing for retirees whose pensions will run dry if something doesn't give is that higher interest rates could have prevented this gigantic mess in the first place.

But the decline in interest rates has been relentless and has yet to let up. The ultimate Catch-22: the lower interest rates fell, the further pension managers had to swing for the fences to make up for the shortfall.

All may turn out well if private equity firms somehow manage to thread the needle - a feat that requires them to deploy committed capital and not pay up for overpriced assets, even as recession looms and threatens their ability to execute deals in the junk bond market.

It takes a certain, shall we say a more stalwart, kind of a person to willingly endure a second showing of certain movies some find unsettling. Deliverance,The Silence of the Lambs and Taxi Driver all come to mind. So, too, doesApocalypse Now, one of the most stunning cinematographic accomplishments of the 20th century, but also one of the most disturbing. Thus, the renewed "Horror!" when Francis Ford Coppola endeavored to remake this classic for the 21st century, and in the process, added 49 additional minutes for fans' viewing pleasure.

But something, perhaps to critics' surprise, rose from the cutting room floor. An even better film emerged. In the words of legendary film connoisseur Roger Ebert, it was "more clear than ever that Francis Ford Coppola's 'Apocalypse Now' is one of the great films of all time." The majesty of Reduxstemmed from Coppola and his long-time editor Walter Murch's approach to the new version. They conceived the May 2011 movie from scratch, using the original dailies, as if the first movie had never been made.

There is now another possible 21st century remake on another cutting room floor - the trading floor, that is. With this potential remake comes a question that no doubt haunts today's investors: Are the markets capable of producing an equally miraculous encore? Determining markets' fate largely comes down to their overlords, the kingpins of private equity. At its most simplistic level, a central bank is considered to be the lender of last resort, if circumstances should force that outcome. The mirror image is private equity and the role it can play as buyer of last resort when cycles are nearing their denouement.

It's safe to say that the chronological moment of truth is upon us as April crosses the line in the sand, making the current stock market rally the second-longest in history, trailing only that which crescendoed in March 2000. Last year at this time, the list of rally-rousers was appreciably longer. Sovereign wealth funds were not in liquidation mode defending their countries' fiscal well-being. The initial public offering market was still wide open for business. Unicorn funding was still making believers out of California dreamers. And central bankers' actions held sway over animal spirits for longer than a few trading days.

But those halcyon days have come and gone, leaving in their wake sidelined skeptics at just about every turn, including private equity insiders faced with a forecast that calls for a perfect economic storm. There is, however, one mammoth impediment to private equity joining other would-be buyers who are now in self-imposed holding patterns: money, and lots of it.

In private equity parlance, this "money" is actually capital their investors, known as limited partners (LPs), have committed to invest through funds that have been raised. Those in the business refer to it as "dry powder," as in readily deployable weaponry to wage war on the acquisition front.

A fresh-off-the-press report by the global consultancy Bain & Co. details the year ahead for the private equity industry. The comprehensive study first looks back to 2015, which would have been one for the record books if not for its predecessor.

For starters, 2015 marked the fifth consecutive year that cash distributions from private equity funds to their LPs eclipsed capital calls (cash infusions) LPs had to cough up for fresh investments. Among LPs, fewer than 10 percent had wired in funds in excess of what they had allocated for the calendar year - the lowest since 2007. While this imbalance is great from a cash flow perspective, it also highlights the challenge overvalued assets present to private equity firms that are in the business of buying assets of every kind from public companies to real estate to venture capital.

At the core of the hostile buying environment is the Federal Reserve. Private equity has traditionally been largely in control of its own destiny, especially in the buyout arena. You know the legends of leveraged buyouts (LBOs) - the takeover of RJR Nabisco was so renowned for its hostility, it merited infamy in its own book and movie, Barbarians at the Gate. But that was so '80s.

More recently, we have Clear Channel, Harrah's and TXU as LBO reference points. Some of the vestiges of these deals are still, in fact, with us today, though the sensation evoked at the mention of these names is indigestion, not elation, also care of the Fed.

How so? Bear in mind, the Fed was also private equity's BFF early on in the aftermath of the Great Crisis. Exits that would never have been possible in the real world were rendered so with the magic of zero interest rates. After all, why restructure when you can refinance into a junk bond market that never had it so good? Such was the mantra in the world of private equity. That is, until rates were left too low for longer than even the barbarians could bear.

By the beginning of last year, buyout funds found themselves ponying up record sums based on multiples of a target's earnings before interest, taxes, depreciation and amortization (EBITDA). At 10.1 times EBITDA, 2015 multiples trumped even those of 2007's 9.7 times.

It's safe to say few ever anticipated the bawdiest buyout time in Wall Street history to ever be taken out, especially given LBO volumes. At $282 billion last year, global buyouts were only a hair above that of 2014, and deal count actually fell. Peak valuations suggest that deal volumes should also be running at record levels, but in fact, the last two years haven't witnessed even half the activity of record years 2006 and 2007.

And yet, at over $4 trillion, mergers & acquisitions (M&A) activity did dethrone 2007's former peak. That's the funny thing about ill-conceived monetary policy. The unintended consequences show up in the least likely places, like the M&A battlefield. Corporations, which have been decreasingly rewarded for buying back their own shares, are still reluctant to invest in their businesses. (The Fed, more than seven years in, has yet to wake up to this reality. But the fact remains that companies will simply not make major investments until they know how to envision a clean operating environment - an impossibility with artificially low interest rates.)

The alternative to share buybacks to juice your earnings: buy other companies to grow the top line in the absence of economic growth that justifies organically growing the company, and payrolls, from the inside out. And that's exactly what companies have been doing with their inflated stock prices and cheap debt financing. The nasty side effect for private equity firms is that corporations have literally priced themselves out of their own LBO market.

As the Bain report dryly concludes:

"With generally benign debt markets continuing to finance most deals, this confluence of favorable conditions has created attractive industry economics for every constituency save one: current buyers."

What's a private equity chieftain to do? Well, that is the trillion-dollar question weighing on just about every professional investor's mind. You see, at $1.3 trillion, they're sitting on $100 billion more than they were at this time last year. That's what happens when you're taking in more in capital commitments than you're shelling out to make fresh investments for five years running.

That said, 2015's fundraising of $527 billion did not surpass 2014's $555 billion, nor did it come close to the $681 billion record raised in 2008. But the figure was nevertheless extraordinary against a backdrop of anemic global growth and cratering commodities prices.

2015's slightly lower level of fundraising also masks the fact that the year did not put an end to one of the biggest road trips of all time. No fewer than 12 large buyout funds, each of which was targeting funds of $5 billion or more - that's $86 billion in aggregate - were still on the road at the beginning of this year. And that's just the big boys. In all, some 318 global buyout funds were road-showing at year end, seeking to raise $247 billion - the largest dollar figure since 2008 and the highest number of funds in the market at one time on record.

The main driver: insatiable demand on the part of those ravenous limited partners, which the Bain report characterized as "hungrier than ever." Bain might have added that LPs are in a hurry: private equity funds require lock-ups of a decade, or more in some cases, and tend to take about a year to raise a given fund. That makes it more remarkable yet that 40 percent of buyout funds closed in six months or less.

As the Bain report noted:

"Funds are closing faster, and the share of those that hit or exceeded their goals was higher in 2015 than at any time since the precrisis boom of 2007."

Not surprisingly, LPs are also particularly keen on the biggest names with proven track records. Among the five largest funds closed in 2015, all exceeded their fundraising targets, and every one of them was significantly larger than its predecessor. The biggest of the bunch was Blackstone Capital Partners VII, which raised $18 billion - the second biggest since that record year, 2008. Launched in November 2014, the fund closed before the holiday season with committed capital at 111 percent of its predecessor fund, as in BCP VI.

The odds are high that LPs' appetites won't wane anytime soon. You may have noted in recent headlines that efforts to right Chicago's pension plan were ruled unconstitutional by the judiciary, prompting Fitch to downgrade the city's credit rating to one mere notch above junk status.

In the event you're not connecting the dots, pensions, tethered as they are to unrealistic rate of return assumptions, will remain beholden to private equity investments until such time as they're allowed to revert to prudent portfolio allocations. That, however, won't happen until the time comes to truly reform the pension system, which might never happen if the courts stand their ground.

The sad thing for retirees whose pensions will run dry if something doesn't give is that higher interest rates could have prevented this gigantic mess in the first place. But the decline in interest rates has been relentless and has yet to let up. The ultimate Catch-22: the lower interest rates fell, the further pension managers had to swing for the fences to make up for the shortfall. Hence pensions' record and reckless allocations to private equity funds, which are egregiously inappropriate given their risk profile and pensions' inherent liquidity requirements as Baby Boomers begin to retire en masse.

Of course, all may turn out well if private equity firms somehow manage to thread the needle - a feat that requires them to deploy committed capital and not pay up for overpriced assets, even as recession looms and threatens their ability to execute deals in the junk bond market.

Just keeping the high yield market open for business is a tall order. Even if the current cycle takes out the one that crashed to a halt in 2000, it would take a miracle of monetary policy to get all the junk debt coming due refinanced.

According to Moody's, U.S. junk-rated companies have $947 billion of debt maturing between 2016 and 2020. The furious rate at which high yield firms have been accessing the capital markets is best illustrated by the fact that five-year maturities have risen by a fifth from Moody's February 2015 report and by 18 percent from the previous high of $805 billion recorded in 2010.

The coming deluge of junk debt refinancing helps explain why the last of the big three credit rating agencies, Standard & Poor's (S&P), recently reported that the average rating on high yield issuers had fallen to a record low. As sure as day follows night, S&P warns, defaults promise to chase crippled credit quality into the sunset.

So what is private equity to do?

As buyer of last resort, does the industry have a moral obligation to keep the fires burning under the current historic rally? Most will hope so. But the risk grows with every mega-fund raised that the perverse investing environment will render private equity's record pile of dry powder into something akin to napalm.

Can you say Apocalypse Then?


Danielle DiMartino Booth
Former Central Banker, newsletter provider, research analyst, contrarian

Respite not recovery

Commodity concerns

With Iran refusing to play ball on cuts to oil production, Saudi Arabia is tightening its regime of economic austerity. Annual tax revenues will go up by £70bn and previously free services such as health care will be privatized.

It is instructive to see that the world's second-biggest oil producer feels under pressure to act, despite its huge foreign reserves. There are those who argue that Saudi should devalue its riyal, which has kept its peg to the US dollar unchanged for three decades. However, in common with other oil producers, the leadership in Riyadh is sticking to the peg because 90% of the country's exports are priced in dollars.

There has been a correction of nearly 50% to the February-March oil rally. The sensation is that investors might not be as sanguine about the economic outlook as they had been thought to be. As a result, the commodity currencies were the poorest performers on Monday. The Canadian and Australian dollars lost a cent each to sterling, -0.5%, with the Norwegian krone beating them by only a whisker. South Africa's rand fell by twice that much and the NZ dollar brought up the rear with a daily loss of -1.4%. The safe-haven Japanese yen led the field for a second day.

Sterling gets lucky

Except in the rarest of circumstances, major currencies do not make spectacular gains or losses for days on end. So it was with sterling on Monday, when it took second place to the yen, strengthening by an average of 0.4% against the other dozen most actively-traded currencies.

There was no suggestion that investors had found new enthusiasm for the pound. It was more a case of them being unable to justify giving it another whack. There was little to chose between the pound, the euro, the franc and the Swedish krona and the US dollar was only a quarter of a cent behind them.

The US dollar took a small step forward overnight after Chicago Federal Reserve President Charles Evans spoke of two rate increases this year. The Kiwi took a step backwards in response to a 13-point fall in NZ business confidence, from 15% to 2%. The Aussie firmed when the Reserve Bank of Australia left its Cash Rate unchanged at 2%.

Services PMIs

Today's biggest topic will be the round of purchasing managers' indices from the services sector. Australia opened the batting with a less-than-inspiring 49.5 but investors were more interested in what the RBA hadn't done.

All of the European and North American PMIs are forecast to be in the growth zone above 50. The UK measure is pencilled in at 54, as is one of the US readings.
Other data on today's list cover Euroland retail sales, Canada's and America's balance of trade and the global dairy trade index. China's services PMI comes out tonight.

Japanese online broker Monex adopts Broadridge processing solution

Monex, one of Japan’s largest online trading brokers, has chosen Broadridge Financial Solutions to support its Japanese equity and investment trust processing business.

Through Broadridge’s JASDEC (Japan Securities Depository Centre) Processing Solution, Monex will strengthen its retail trading and client services in support of its future growth strategy.

“We are pleased to partner with Broadridge, who has extensive experience with securities firms and a significant track record in post-trade processing in Japan as well as other Asian markets,” says Oki Matsumoto, Chief Executive Officer at Monex, Inc. “Broadridge’s JASDEC Processing Solution will enable us to further improve our retail trading service and to provide us with a real-time processing capability for upcoming market changes focused on shortening settlement cycles.”

Broadridge provides a complete solutions suite for Japanese securities as well as investment trusts that clear and settle through JASDEC, including both JASDEC’s Pre-Settlement Matching System and JASDEC’s Book Entry Transfer Systems. The solution offers brokers in Japan, such as Monex, state-of-the-art functionality and enhanced scalability to grow into other business lines and product segments. Broadridge supports multiple brokers in Japan, including many of the country's top-tier institutional brokers.

“Demand for processing standardisation is on the rise with Japanese brokers consistently investing in technology in preparation for significant market changes, such as Japanese Government Bond (JGB) T+1 and Japanese equity T+2,” says Yoshiyuki Hoshino, COO, Japan, Broadridge. “We are thrilled to welcome Monex to our continually growing Japan client base enabling its business expansion and ensuring a solid footing for their technology reengineering programme through high levels of straight-through processing, continuing investment in technology and commitment to delivering operational efficiency through a world-class standard of service.”

Broadridge enables clients’ post-trade processing in over 70 markets and has demonstrated a long-standing commitment to firms in Asia Pacific keeping ahead of rapid market reforms, most recently including connectivity to Shanghai-Hong Kong Stock Connect, support for ISO20022 messaging for Japan, and investments to support forthcoming settlement infrastructure changes in Singapore also based on ISO20022.

What happened to yield?

Not Veblen goods

In the last month the Euro was among the front-runners, not quite up to the pace of the Swiss franc, the Swedish Krona or the Japanese yen but there or thereabouts. So what do the four currencies have in common? What makes them so attractive to investors? They all have negative interest rates.
They are expensive to own.

This is not, of course, a case of the conspicuous consumption identified by Thorstein Veblen: he was thinking more of $200k handbags and million-dollar watches.

Investors have been buying the currencies despite, not because they are expensive. Their interest rates are negative to discourage buyers. The central banks' aim is to hold down their currencies' value and to stave off deflation. And strategy isn't working: Japan's yen has been the strongest performer every day this month, rising by 4.2% since the beginning of April.

Minutes don't matter

So if investors are obviously not "chasing yield", why are they so antsy about the Federal Reserve's sluggishness in raising US interest rates? The minutes of the March FOMC meeting, released yesterday, pointed to two more increases this year and nobody is convinced.

The Federal Open Market Committee minutes seemed to support the idea of two interest rate increases this year. Shortly after their publication yesterday evening St Louis Fed president James Bullard told a TV interviewer much the same story. Yet investors remained unimpressed. The US dollar was Wednesday's third-weakest performer behind the South African rand and the British pound.

Needless to say, sterling had another difficult day. Its one redeeming feature was the way Cable rebounded from $1.40. The psychologically-important round number provided support that had been conspicuously lacking when it was tested six weeks ago. The question now is whether sterling will find similar support against the euro from the support-resistance line at €1.225.

Central bankers abound

A hopelessly short list of ecostats today will provide little to inspire investors. However, the heads of the European Central Bank and the US Federal Reserve both have speaking engagements and three former Fed chairmen will be joining Janet Yellen on a panel discussion in New York.

There are no economic data of any consequence from Britain or Europe. America reports on weekly jobless claims, whose importance is lessened by the switch in focus from job numbers to wage inflation.

Mario Draghi will attend Portugal's Council of State, the president's advisory board. No time has been announced and it is unclear if his comments will be reported. This evening the Fed chairperson will join her predecessors Paul Volcker, Alan Greenspan and Ben Bernanke in a panel discussion at International House, a New York academic institution.

Towers Of Dabble
April 06, 2016 Danielle DiMartino Booth.

Man’s long determined history of dabbling in the building of touted towers, surely not for his self-gratification, but rather to bring him closer to God, has rarely been met with benevolence. Maybe God doesn’t like man, who He created after all, attempting to smash through His glass ceiling. Consider, if you will, the first known example of such an attempt. Having heeded Noah’s warnings, a postdiluvian band of survivors just couldn’t resist taking a stab at the celestials, raising the Tower of Babel they were sure would be gloriously received.

According to preeminent Bible historian James Kugel, there would be no such reception, just rejection: “The real crime involved in the building project was the tower itself, which was intended for the purpose of ‘storming heaven’ or some related evil desire.”

Though the Old Testament’s telling leaves much open for interpretation, the idea of vengeance being associated with sky-piercing structures seems to have stuck, especially among financial market historians. Analysts at the British bank Barclays originally voiced the idea that if you build it, it will come, as in a financial crisis. That is, every time an erected edifice unseated its predecessor to become the newest world’s tallest building, economically upsetting times tended to follow. It’s uncanny how well that shoe continues to fit.

It all started at the height of the Roaring Twenties on that little 13.4 x 2.3-mile island we know as Manhattan. Walter P. Chrysler was keen to build a monument, namely to himself. But there was competition nipping at Chrysler’s heels with the simultaneous construction of 40 Wall Street, which would indeed be the world’s tallest, that is, for one month between April and May 1930.


On May 28, 1930, it took all of 90 minutes to secret a clandestinely constructed spire atop Chrysler’s building, thus trouncing his downtown architectural rival. Of course, the real victor emerged 11 mere months later when the Empire State Building opened in early 1931 presaging, by the way, the Great Depression. It would be nearly 40 years before a taller tower would rise.

The construction and December, 1970 opening of the World Trade Center would then coincide with the end of the second longest U.S. economic expansion which began in 1961. Chicago’s Sears Tower would go on to wrest away the reign in 1973, a top spot it held for more than two decades. It’s opening’s appeared to herald the nasty stagflationary recession that ended in 1975. Malaysia’s 1996 title sweep arrived alongside the Asian financial crisis. Most recently, the 2007 opening of Dubai’s Burj Khalifa augured the Great Financial Crisis.

Surely these episodes have been sufficient to appease the dieties. In short, quite the opposite. If frenetic skyscraper construction flags misallocation of capital, we could be in for a doozy of a correction in global commercial real estate. Consider the numbers in the aggregate. It took 80 years after the opening of the Chrysler Building to build the next 49 supertall skyscrapers, defined as 300 meters (984 feet) or more.

How on earth, or in the heavens, to put it more aptly, has the hundredth supertall just opened on Park Avenue? It might have something to do with the fact that in the short five years through 2015, a subsequent 50 supertall skyscrapers have been erected.

Economic historians could well have been shaken to their very foundations upon hearing news that financing to construct a historic colossus had been secured late last year. Rising from the sands and promising to reach the seraphs, Saudi Arabia’s Jeddah Tower is to rise 3,280 feet into the stratosphere. That’s 1,000 meters, as in one kilometer, besting the Burj by 591 feet. The question is, will there be economic repercussions?

Judging from the collapse in the price of oil, some might argue divine intervention has already come and gone. It is certainly the case closer to home that the oil patch blues have dragged down commercial real estate. The latest data on commercial mortgage-backed securities (CMBS) delinquencies reads like a who’s who of yesteryear’s shale boom.

Some 17 loans totaling $152 million became freshly delinquent in March, the largest one-month tally since November, 2012, according to a new Morgan Stanley report. Six of these gems are located in ‘oil boom’ territories including Casper, Wyoming; Odessa and San Angelo, Texas and North Dakota’s Dickinson and Bakken Shale regions. Another notch down the distress ladder, 14 loans moved to the status of “specially serviced,” when a new mortgage servicer takes over a loan that’s 90 days or more in arrears; 10 of them had low oil prices to blame.

The working assumption must be that the economic damage inflicted by energy’s woes will be contained. How else to explain the construction of a $1.2 billion mecca in the land of the Saudi kings? Unless, that is, it’s as simple as the money being there for the financing. Stranger things have been known to happen when interest rates are held at low levels for longer than imaginable by yield-starved investors.

History stretching back to Biblical times suggests there will be economic pain between now and the Jeddah’s scheduled opening in 2020.

The fine folks at Jones Lang LaSalle (JLL) would beg to differ. A new study released by JLL, the real estate investment management giant, forecasts real estate transaction volumes will crest $1 trillion by the end of this decade, rising from $700 billion last year. The enabler will be international money flows: JLL estimates $500 billion in annual cross-border activity by 2020.

The movement between regions will be catalyzed by demographics, according to the JLL study, which notes there will be more people over the age of 55 by 2050 than there were inhabitants on earth in 1950.

“This demographic impact will have a profound effect on real estate investment strategies with the amount of private equity capital targeting direct real estate set to increase by over 500 percent, much of it driven by increasing institutional allocations looking at higher yielding opportunities.”

Did you notice something implicit in JLL’s argument? It would seem lower for longer will remain the mantra for the foreseeable future, which suggests frothier markets and subpar growth will continue. The most interesting tidbit comes down to who will be doing the investing, that is private equity.

As it were, private equity “dry powder” directed specifically to real estate investments rang in the New Year at record levels. There is now $231 billion in dry powder available just for properties in the United States after $107 billion was raised in 2015.

For being six years into a recovery in commercial real estate, investors certainly remain enthusiastic, especially public pensions. Pensions have allocated some $207 billion to private equity funds since late 2012. Increasingly, allocations have targeted real estate funds with March of this year providing a perfect example of the merriment surrounding this asset class. Here’s a wee sampling with special notations if the real estate fund is of a particular bent:

Texas Teachers: $500 million
State of Oregon’s Pension: $300 million
Pennsylvania Public School Employers: $307 million
Ohio Workers Compensation Bureau: $125 million
State of Minnesota’s Pension: $100 million (distressed); $100 million (opportunistic)
State of Maine Pension: $50 million
State of New Jersey: $200 million (commercial)
State of Kansas: $50 million
Texas Municipal: $375 million

Sub-Total $ 39,132,000,000


“Pensions’ chronic underfunding has prompted them to stretch to achieve unrealistic return targets,” New Albion Partners’ Brian Reynolds explained. Reynolds has been keeping a running tally of these allocations and is quick to point out that leverage is often needed to hit the bogeys, which are 7.5 percent or more. Bear that in mind when you consider the money being shoveled into these funds.

It really comes down to size, that is, of the pension system. In the early 1980s, pension liabilities amounted to about 50 percent of gross domestic product (GDP); today they are 100 percent of GDP. “Because of their growth, their investment flows have led to asset bubbles that have generated permanent losses,” Reynolds added.
Pensions flocked to hedge funds but that strategy blew up after Long Term Asset Management nearly took down the financial system. This strategy was followed by wholesale herding into commodities, which we all know ended is disaster.

The catch is the rate-of-return bogeys have barely budged despite Baby Boomers moving increasingly closer to retirement suggesting some risk should be taken off the table. (Rather than keeping you in suspense, it’s nearly an impossible feat to lower return targets. Less in assumed returns means states and municipalities have to pony up more money they don’t happen to have on hand. The State of Connecticut has reached the point where it is now taking a stab at taxing Yale’s endowment in a desperate attempt to top off its underfunded pensions.)

No matter how you slice it, most public pensions face a dire set of circumstances, which begs the question: Just what are they to do?

Reynolds’ reply: “They have turned to the last remaining asset class with high expected rates of return – commercial real estate. It’s as simple as that.”

Perhaps pensioners should begin praying the JLL report pans out. With commercial real estate prices declining in January for the first time since 2010, the latest data available, and investors balking at rich valuations, it just might take a miracle to keep profitable prospects alive.

In the meantime, all we can do is sit back and wonder what’s to come. Transaction volumes in the trillions and heights exceeding a kilometer – how do tomorrow’s architects top that? Is man’s vanity so great he will risk an even sharper blow to the glass in that celestial ceiling? If he does, what vengeance might follow? The best we can do is hope future history books don’t include records that give new meaning to that old warning, “Look out below!”
​

Has the Fed Bankrupted the Nation?
April 13, 2016, Danielle DiMartino Booth

Volcker, Greenspan, Bernanke and Yellen. Which one does not belong? Logic dictates that Volcker should have been odd man out. After all, there is no legendary “Volcker Put.”

The towering monetarist made no bones about never being bound by the financial markets. The same can certainly not be said of his three successors. And yet, history contrarily suggests it is to Volcker above all others that the financial markets will forever be beholden.

Many of you will be familiar with Michael Lewis’ memoir, Liar’s Poker. Yours truly first read the book in a Wall Street training program much like the one Lewis survived to describe in his autobiographical work. The take-away then, in late 1996, was that Gordon Gekko was right — greed was good.

Recently, a second reading of Liar’s Poker, following nearly a decade inside the Federal Reserve, delivered a much different message than did that first youthful reading and was nothing short of an epiphany: Paul Volcker, albeit certainly inadvertently, created the bond market.

On Saturday, October 6, 1979. Volcker held a press conference and announced that interest rates would no longer be fixed and that further the Fed would begin to target the money supply in order to curb inflation and “speculative excesses in financial, foreign exchange and commodity markets.”

Alas, this new regime was not meant to be. In trying to introduce an alternative to interest rate targeting, the Fed replaced one guessing game with another. Predicting the demand for reserves and then buying or selling securities based on that demand proved to be just as dicey as a similar exercise to target a given level of interest rates had been.

Volcker’s experiment ended in 1982. But by then, the genie had escaped the proverbial bottle.

Michael Lewis explains: “Had Volcker never pushed through his radical change in policy, the world would be many bond traders and one memoir the poorer. For in practice, the shift in the focus of monetary policy meant that interest rates would swing wildly. Bond prices move inversely, lockstep, to rates of interest. Allowing interest rates to swing wildly meant allowing bond prices to swing wildly.

Before Volcker’s speech, bonds had been conservative investments, into which investors put their savings when they didn’t fancy a gamble in the stock market. After Volcker’s speech, bonds became objects of speculation, a means of creating wealth rather than merely storing it. Overnight the bond market was transformed from a backwater into a casino.”

What a casino. As Lewis points out in his book: In 1977, the total indebtedness of U.S. government, corporate and household borrowers was $323 billion. By 1985, that figure had grown to $7 trillion.

Volcker left the Fed in August of 1987 after handing the reins over to Alan Greenspan. Two short months later, there would be a celebrated birth, that of the Greenspan Put, a watershed that truly got the party started. At last check, that party’s still going strong though stress fractures have begun to show on the festive facade. Of course, you wouldn’t have noticed them with the celebration of credit continuing to party on.

By year’s end 2015, U.S. indebtedness had swelled to $45.2 trillion. Tack on financial's, which few do, and it’s $64.5 trillion and unabashedly growing. We are a nation transformed.

There are many temptations that tantalize when it comes to delving into debt. Uncle Sam now owes a cool trillion more than the nation produces. In our history, only once before has the divide between debt and production been so wide. That time was right after World War II. The difference between now and then — the cost was great but the purchase of our freedom was priceless.

What has today’s vast store of debt purchased? Certainly not freedom.

American nonfinancial businesses are today in hock as never before, to the tune of $14 trillion. Sadly, most of their debt accrued since the crisis has been funneled into nonproductive endeavors that involve balance sheet tiddlywinks to pad earnings. Don’t believe a single economist who dares quantify the consequences of a foregone generation of capital expenditures.

(At the risk of digressing, there was a bittersweet irony to Greenspan’s lamenting a lack of productivity growth when record share buybacks occurred on his watch. Consider his tenure to have provided the training ground for today’s C-suite occupants.)

At the most fundamental level, it’s the household sector that has undergone the most tragic transformation. We of that sector are, after all, what this country is and what it will be tomorrow. And it was individual citizens who had the good sense and vision to found a democracy built on the tenet of government’s role being protector of our inalienable rights to life, liberty and property. We earned these rights through relentless hard work and proudly claimed them as our own. It was the American way.

But what happens when the incentive system that encourages the honest attainment of that very American Dream breaks down? What happens when people in positions of power add the forbidden fruit of debt to our nation’s recommended daily allowance of consumables cloaked as a bonafide food group?

Whether it’s margin debt, mortgages or car loans, Americans have been brainwashed into believing that living beyond their means will somehow get them ahead. Consider the data, which simply do not lie.

In 1984, disposable income, what we take home in the aggregate after we pay our taxes, was $2.9 trillion. That same year, total household debt was $1.9 trillion. Back then, we covered our debts and had a fair bit left over with which to fund savings and possibly pay for a trip to Disney or for our kids’ college educations.

Then along came ‘measured.’ The first era of ‘lower for longer’ interest rates arrived in the aftermath of the dotcom implosion. Baby boomers, while still years away from retirement, had nevertheless been shocked to see their retirement savings take such a huge hit. But rather than batten down the hatches, they whipped out their credit cards marking a turning point in our nation’s history.

The Gregorian calendar dictates that the first year of this young century was 2001. That also happens to be the first year Americans spent more than they cleared in disposable income by way of accumulating debt: they took in $7.74 trillion and racked up debts that totaled $7.82 trillion by year’s end.

Feeding the shift from those who once had rainy day funds to those who had been had were six words constituting a commitment from Alan Greenspan stating that interest rates would rise at a, “pace that is likely to be measured.” Stand and deliver the famous obfuscator among orators did. The good times lasted for so long that households began to get unsolicited offers for new credit cards and mortgages in the mail…for their children.

Was the Maestro warned of the disaster building? The answer to that is well documented in the terrible tale of Edward Gramlich, who pled with his boss to put a stop to the subprime madness before it claimed countless victims, the largest of which would be the entire U.S. economy.

And yet the borrowing binge continued, even in the darkest days of the foreclosure crisis as mortgage balances collapsed. Of course, by then, Greenspan had exited stage left, off to sign book covers and leave the cleaning up of the disastrous detritus to his successor.

What was the harsh medicine Ben Bernanke prescribed to wean the country off over-indebtedness? Why gasoline. Bernanke poured fuel on the fire in the form of seven years of zero interest rates making debt more accessible than it had been in 5,000 years of recordkeeping (as per Merrill Lynch’s math).

The result was that households never saw even one year in which they made more than they owed. Not one, even though the period of ‘beautiful deleveraging’ was supposedly underway.

From this and that dotcom IPO, bought on margin, no less…to liar mortgages…to super subprime car loans, the elixir of aspiration has simply been too strong to resist. Lost along the way is a culture that once valued waiting for the better things in life. In the wake of this wholesale surrender of a culture, households have slowly succumbed to a subpar existence. That’s the trouble with living beyond your means. It never lasts indefinitely and always leaves you worse off than had you refrained from the get go.

The latest household data for 2015: Disposable income, $13.4 trillion. Debt, $14.2 trillion.

The prognosis? Mortgage debt is rising, credit card usage is back in vogue and student debt continues to spiral upwards. Car lending meanwhile, may be taking its last gasp for this cycle as fresh reports show used car prices have fallen for four straight months, a classic precursor to a downturn in the auto sector.

As for the fair chair, Janet Yellen, by all accounts she is running scared, pulling out all stops to forestall a recession in the hopes that there is such a thing as The Great Moderation, Part II.

To say Yellen is just now waking to the dangers of over indebtedness would be disingenuous. She was President of the San Francisco Fed when the housing bubble literally inflated and burst in her backyard.

No, perhaps what she is now realizing is the deep trap she is in. Her cabal of economists have long since assured her that government, corporate and household debt service is so low that history itself has been rewritten. But therein lies the mother of all Catch 22s, wrought by nearly 30 years of central bankers encouraging, enticing and imploring debt-financed spending while punishing, penalizing and all but outlawing saving.

Yes, the debt service is at record lows, but the mountain of debt that’s been accumulated dictates that the only thing the economy can withstand is low rates in perpetuity. The alternative is simply unimaginable. There would be widespread ruin and perhaps even the bankrupting of a great nation.

If only we didn’t know how we got to this point. But we do. We were duped by Liar’s Brokers and now have to live with the consequences. To quote Michael Lewis one last time, “In the land of the blind, the one-eyed man is king.”

Calm not alarm

Sterling continues to weaken

The recent theme of sterling weakness continued on Friday as the UK construction industry delivered further evidence of a slowdown in business conditions. Brexit fears, recent stamp duty changes, alterations to the tax on second home ownership and buy to let are now seemingly beginning to weigh on this sector.Both new work and maintenance reported declines, dipping by 0.2% and 0.5% respectively in February from a month earlier.

House price pressure persists, although with UK house prices increasing by 7.6% in the year to February, but down from the 7.9% recorded for the year to January, perhaps a pause or even a wobble is emerging.

US consumer confidence

From the USA we saw a strong uplift in business activity levels in the New York manufacturers report. The NY Empire State manufacturing survey for April 2016 climbed 9.6 points, representing its highest level for more than a year. Another survey out on Friday afternoon painted a rather negative picture as it detailed a drop in US consumer confidence. The University of Michigan sentiment index fell to 89.7, the lowest reading for 6 months, down from 91 reported in March. The drop relates to the lack of American wage growth in spite of the continuous steady gains in employment numbers. Respondents are showing their disappointment and frustration having seen no wage growth improvements.

Wage growth will of course play a major part in the FOMC's interest rate decision making , with the lack of growth possibly meaning US rate hikes will not be so pronounced.

G20 Summit

As the weekend got underway focus on the G20 and Doha oil talks was always going to be of major importance. As the G20 in Washington came to a close the finance ministers and central bankers were happy to share a more upbeat analysis of current global economic conditions, which is in stark contrast to the assessment following the February meeting held in Shanghai when global world markets were in turmoil.

The IMF did revise global growth prospects downwards again, but reiterated that it was alert to the current risks, with the UK's possible exit from the EU, Brazil engulfed by political scandal, Greece still struggling with debt issues and China's slowdown all taking a toll on global investment and confidence conditions. Whilst the list is long the IMF remains determined to rally collective endeavour and not be alarmed.

The Doha oil talks held in Qatar, with most of the world's largest oil producers in attendance, was offered up as a chance to help stabilise the oil price with a possible freeze to production. Saudi Arabia, the world's largest

crude oil producer, had stated it would be willing to freeze output but only if all major producers do likewise. With Iran absent from the gathering, agreement to cap production did not materialize, with the oil price plunging in early Asian trade. The Canadian dollar alongside other commodity currencies traded sharply lower as oil producers keep pumping out oil at the same rate.


MoneyCorp

Traders are in a tentative mood today ahead of the Federal Reserve rate announcement later this morning as overall sentiment in the market has soften on the back of a poor earnings announcement from Apple.

With trading well underway in Asia, the Australian dollar is making headlines, dropping nearly two percent against the dollar as an unexpected dip into consumer price deflation shocked the market and raised the spectre of policy action on the part of the Reserve Bank of Australia. Adding to these woes has been softness in commodity pricing which has also contributed to softness in New Zealand’s currency ahead of its central bank announcement tomorrow. Contrasting the performance of its Southern counterparts, the yen is once again benefiting from its safe haven status, moving higher despite rumours that the Bank of Japan has plans to push rates even further into negative territory.

Looking to European markets, there’s not a whole lot of action outside of currency and commodities, as pan European indices trade flat while traders are loath to making any big moves ahead of the Federal Reserve’s announcement. Both Brent and WTI crude have popped higher while most other commodities have ebbed lower. The British pound has seen a nice bump against a broadly weaker US dollar while trading even with the euro as Brexit fears abate, albeit at least temporarily. Similarly the euro has also shown signs of strength against a greenback which has really been in the doldrums since February’s G20 meeting.
​
Ahead of the North American session, equity futures on the S&P are signalling that trading will open in negative territory as Apple’s poor earnings announcement continues to weigh on risk sentiment. With the market value of oil continuing to show signs of strength despite the sustained overabundance of the physical commodity, the US dollar remains on the retreat against the Loonie as it ebbs higher against its southern neighbour. While the loonie has been one of the strongest performing currencies against the greenback since the beginning of the year, this movement has been mostly driven by changing interest rate expectations in the United States as the greenback has been hammered against the majority of its counterparts. Today should be no different, with the market largely anticipating that the exceptional dovishness on the part of the Federal Reserve will continue as it looks past solid wage growth, employment and inflation numbers in the United States instead focusing on the potential risks of market turbulence in the global economy. With fed futures now pricing in a 50/50 chance of the next rate rise being in September, there is a growing risk that if wage growth and inflation continue to be sustained at these levels that the market may be caught off side by the speed that the Federal Reserve decides to shift gears back to a more hawkish stance. The obvious implication being that the multi-month lows now seen for the greenback can quickly reverse and catch all market participants off guard.



Best of Luck,
Sean Coakley, CFA
Market Analyst

This Is – by Far – the Biggest Threat to Your Investments

Have you ever noticed that nearly all the world’s surplus rests on Wall Street… or maybe in the City of London? I think this is something we should pay attention to.

So, let’s face it directly for a moment: All the big investment markets are owned and controlled by the Western aristocracy: by politicians, high officials, mega-corps and deep-state operators. These people are fully in control of the markets; they can close them anytime they like.

And in fact stock and bond markets are closed, and fairly often. NASDAQ has closed repetitively for technical reasons, all the New York markets closed for Hurricane Sandy, and nearly every market was closed after 9/11. The markets reopened each time of course, but only because it was in the best interest of the aristocracy. They didn't have to reopen them. These people were – and are – in control.

This being the case, I’d like to familiarize you with two words that you have rarely heard but which are likely to be heard far and wide some day: Systemic Risk. Wikipedia defines systemic risk as “the risk of collapse of an entire financial system or entire market, as opposed to risk associated with any one individual entity, group or component of a system….”
My point is this: Your most serious risk is not from the failure of a single stock or even a group of stocks, but a closure of the market itself.

“They’d Never Do That!”

Of course they would… and of course they have.

Don’t we remember what they did to Cyprus, just a few years ago? Haven’t we seen their current campaign to ban cash? Didn’t we see them save the institutions they owned in 2008, selling average folks down the river? And there’s more, including the US Treasury holding meetings on taking control of IRAs and 401(k)s and the IFM discussing “financial repression.”

The truth is that the Western aristocracy does what’s best for the Western aristocracy. If that means keeping the status quo going, that’s what they’ll do. If it means turning the status quo off, they’ll do that. Shutting it down would be a big and risky step for them of course, but if they face a near-certain loss of control otherwise, you can bet that they’ll do just that.
“Oh TINA, Thou Art a Heartless Bitch”

With due credit to William Shakespeare, TINA – There Is No Alternative – may end up being the most heartless wealth-destroyer in history. Why? Because of everything noted above and because of this:

Anyone who has examined the current situation knows that the markets should have tanked years ago and have been held up with massive currency injections from the central banks. They know that the system would crumble if any serious portion of that was pulled out or even if interest rates reverted to the mean.

And yet, people stay right where they are, smack in the middle of the risk zone. And why? Because there is no alternative. Where else can they put a million dollars or a few million euros? How many of us even have savings accounts anymore? With interest rates hovering around zero, they make no sense.

There are options of course, but they all involve extra work. Dump your money into the stock and bond markets, and you can move it from place to place with the click of a mouse; you can get instant charts and graphs; and of course you get crisp, clean accountings of everything. All is clear, all is simplified, all is easy.

And so, 99% of the world’s surplus has fallen into non-diversified investments: Regardless of ‘market sectors,’ they all stay in the same big pot, controlled by an aristocracy that nearly all of us either distrust or despise.

This, at least in my view, is not a good plan.

But… TINA!

Yes, there are alternatives, but they involve work. Moreover, they also involve us taking responsibility for our failures. And let’s be honest about that too: Having investments ‘in the market’ means that you can blame any number of things for your losses, rather than taking blame yourself.

One option is to invest on Main Street… in a local business. Truthfully, that kind of investing can be far more personally rewarding, but it certainly isn't sanitized and sanctified by authority like Wall Street is. If you invest in a dry cleaner that fails, your authority-minded ‘friends’ might ridicule you; if your Apple stock crashes, it’s merely “bad luck.”

But while investing on Main Street isn't point-and-click easy, it’s far more diversified. And it gives you some personal control over your investments. If, for example, the dry cleaner or the grocer you funded is having problems, you can get involved, rather than watching helplessly from the sidelines.

So…?

So, we face choices. My point is that closing your eyes to your greatest risk – merely because it has an “Approved by Authority” banner draped across it – is a foolish thing to do.


Paul Rosenberg

Large Bank Risk: Liquidity Not Capital Is the Issue
Jun 08, 2016

Todays Outside the Box is a little bit different which, considering that most Outside the Boxpieces can be classified as a little bit different, is not that unusual; but this one needs to come with a warning label that you may find it a tad wonkish. Its from my friend Chris Whalen of the Kroll Bond Rating Agency. When I want to understand something about banks, Chris is one of my go-to guys.

In Chriss latest memo he talks about the push to increase the capital levels of the eight largest US banks. He is critical of that effort in that it doesnt address the real issues. He highlights the fact that even if we do increase the capital requirements of the largest banks, that doesnt mean we wont have problems with them in the next crisis.

It wasnt insufficient capital that got the banks into trouble the last time around. If we dont sufficiently address the issues that hurt the banks and the economy then, there can be no assurance that there wont be problems of a similar nature next time, even with increased capital. This is worth thinking about as you ponder the risks to your portfolio that will come with the next downturn. You cant assume there will not be problems with US banks. Maybe there wont be, but I wouldnt ignore the risk. Good management is more important than capital.

I write this introduction from 32,000 feet, flying back to Dallas. I had several great meetings while in New York; but the highlight was dinner last night with Art Cashin; Jack Rivkin, a longtime PaineWebber partner and now the brains at Altegris; Peter Boockvar of the Lindsey Group; Rich Yamarone, chief economist at Bloomberg; Lakshman Achuthan, the guiding light at ECRI; and Vikram Mansharamani, a Yale professor and author of Boombustology. These are the proverbial smartest guys in the room, and I posed a series of questions to them about the timing of the next recession, their thoughts on the upcoming election, and the economy in general.

Ill take up their range of predictions and consensus regarding the recession call in this weekends letter, and go into some of the risks these gentlemen see, as well as dive into more of my notes from the conference.

My decision to not go to a game three or four of the NBA finals and hope for a game six knowing that it could be a possible closer and hoping that it would be a win for the Cavaliers while I was down front in a box seat now looks to be a bit suspect. I may not be making that trip unless Lebron and the Cavs get their act together and sweep the Warriors at home. After those first two games, I think Ill hold off booking the tickets.

You have a great week. I think Ill call a few more friends and get some additional takes on a recession. Just for giggles and grins.



Your thinking about portfolio risk analyst,

John Mauldin, Editor
Outside the Box

ECB Preview: More Easing Expected In December

Baseline

We expect the European Central Bank (ECB) to leave policy unchanged at the 8 September Governing Council meeting. We do, however, expect it to ease at the 12

December meeting and, given our longer-term focus, we go into this weeks meeting with portfolios positioned for the changes we anticipate the ECB to eventually deliver.

When it eases, we expect the ECB to cut the Deposit Facility rate, extend quantitative easing (QE) and relax the capital key used for distributing government bond

purchases. The policy changes that we anticipate in our baseline should lead to tighter spreads between periphery and German government bonds, tighter corporate

spreads and steeper core-country yield curves.

Rationale

The gap between current headline inflation (0% year-to-date average), the ECBs inflation forecasts (1.3% in 2017, 1.6% in 2018) and its higher target justify further

policy easing, in our view. Faced with this gap, the ECB has to decide between additional easing or lowering its inflation target. We see no desire to change such a

fundamental feature of the operational framework as the inflation target, and so long as the ECBs two-year-ahead inflation forecast is less than 2%, we think that will

keep the bank in easing mode.

Currently, the ECB has precommitted to buy 80 billion of bonds per month until the end of March 2017, or beyond, if necessary, and in any case until the Governing Council sees a sustained adjustment in the path of inflation consistent with its aim of achieving inflation rates below, but close to, 2% over the medium term. Furthermore, the latest dip in core inflation to 0.8% adds to concerns expressed in the July minutes that underlying price pressures continued to lack a convincing upward trend and remained an ongoing source of concern, which tilts the policy response toward additional easing.

The current QE programme will amount to 17% of eurozone GDP by the time it is completed in March 2017. Our baseline sees QE rising to about 23% of GDP by

December 2017, similar to Bank of England and Federal Reserve QE levels. Tapering QE should not come onto the radar screen until the ECBs inflation forecast two

years out comfortably reaches 1.8%2%, which looks unlikely before 2019.




How will the ECB deal with the Bund scarcity problem?

In our baseline, we expect the ECB to relax the capital key allocation for government bonds. Any extension of QE will exacerbate the Bundesbanks problem of finding

enough Bunds to buy without overly distorting the yield curve and exacerbating financial stability concerns; e.g., potentially damaging the business models of the

banking and insurance sectors by flattening the yield curve, an issue that the Bank of Japan is now starting to address in the context of its QE programme. The ECBs

purchases of government bonds are guided by eligibility criteria some hard-coded by the European Treaty, others self-imposed. These criteria include purchasing bonds

at yields above the Deposit Facility rate (-0.4%) and a 33% issuer and issue limit. The ECB allocates total purchases of government bonds broadly in line with its capital

key, and it uses government bonds as the swing factor when it cannot find sufficient agencies, asset-backed securities (ABS), covered bonds or corporates to buy.

Currently, the Eurosystem the ECB and national central banks buys about 18 billion of Bunds per month. Were it to reduce this amount, we think it would prorata

the balance over the remaining countries, which amounts to a tapering of Bunds, especially the longer-dated ones that the Bundesbank has revealed it is reluctant to

buy. Large countries France, Italy and Spain should be the major beneficiaries of tapering Bunds. While relaxing the capital key will be controversial in some

quarters, we think relaxing the other criteria are even more controversial. For example, purchasing bonds at yields below the Deposit Facility rate would realize a loss,

which might require the ECB and national central banks to increase capital reserves and make for awkward explanations to lawmakers in the European and national

parliaments. We also think the importance the ECB attaches to independence makes it reluctant to hold a blocking minority in any issue or issuer, which, in the unlikely

event of insolvency, would complicate the restructuring of sovereign debt. Relaxing the capital key is the path of least resistance, in our opinion, and also makes sense

from a credit easing perspective.

Andrew Bosomworth
PIMCO - Head of Portfolio Management, Germany

Don’t Chop Down the Tree

I am a huge James Bond fan, and my fanaticism has picked up dramatically in the last 10 years, since Daniel Craig has been playing James Bond.

Daniel Craig is the best James Bond ever. There is no argument about it. I don’t want to read anything about Sean Connery in the comments section. I have seen every Bond movie multiple times. I will bet my career on it.

I’m often accused of being overdressed. I wear suits as often as possible (except in the summer in South Carolina), and it is because of James Bond. There really is no such thing as being overdressed, in my opinion.

Anyway, maybe you saw the news Tuesday that Sony Pictures really, really, really wants Daniel Craig to come back and do two more movies, and they are willing to pay him $150 million to do it, which would make him one of the highest-paid actors of all time. Maybe the highest paid.

Daniel Craig has said he would rather slit his wrists than play James Bond again, when offered £68 million before. He told them to pack sand.

$150 million to do two movies.

Now look, I don’t care if it’s waterboarding we’re talking about, I’d get waterboarded—twice—to get paid $150 million. Playing James Bond can’t be worse than being waterboarded.

I think Mr. Craig had other ideas about what he wanted out of his career, artistically speaking, and he thinks that the Bond movies are uber-cheesy and his acting chops are being wasted on this drivel.

All of that may be true. But if you are born with a gift—like, maybe being the best James Bond in history—then you have to share that gift with people. I don’t care what that gift is. You have to share it with the world. I play my tune on the computer keyboard. Willie Mays played his tune on the baseball bat. We don’t get to choose what we’re good at.

Not to mention, if you are James Bond, you are essentially the coolest guy in the world. So you are going to turn down $150 million, and you are going to turn down being the coolest guy in the world, so you can do stuff like… Layer Cake? Which wasn’t all that great.

It may seem like I’m being hard on Mr. Craig, but I’m being a lot easier on him than the rest of the Internet is—most people think he’s completely lost his mind. I get the art vs. commerce debate. Went through that with All the Evil of This World. Opted for art instead of commerce. Don’t regret that decision one bit. But if you were offering me $150 million and the title “Coolest Guy in the World,” for me to go with commerce instead of art? Tougher decision.

Don’t Chop Down the Tree

Don’t chop down the tree that gives you all this delicious fruit. But people do it all the time.

Most of the time, they do it unintentionally—and blow themselves up. Drug problems, DWIs, divorces, sex scandals… there are a lot of people who lead pretty enviable lives, and all they have to do is suit up and show up, to get that paycheck and whatever adoration they get from the public. They have this gift to give, and they get money and fame in return. It really is that easy. It’s not necessary to come up with examples—I’m sure you can think of a lot.

Daniel Craig happens to be chopping down the tree on purpose, which makes him a little different, but the same principle applies.

You know who is the opposite of Daniel Craig?

Pat Sajak.

Pat Sajak has been doing the same gig for what, 30 years now? You think he is bored? He is probably bored.

Every day, the same middlebrow dopey contestants, with the same atrocious shirt-tie combos they probably got in a package at Jos. A. Bank, the never-changing wheel, the same corny jokes. How many times can you say, “Oh, maaaaaan” when someone lands on Bankrupt? How many times can you get tackled by some woman for winning less in the bonus round than you make for one taping?

You think Daniel Craig is bored playing Bond? Nowhere near as bored as Pat Sajak.

But Pat Sajak has never chopped down the tree. He has never complained about being a game show host, about watching that wheel go round and round his entire life.

He is the best at what he does, and he shares his gift with the world. He’s never blown himself up. Never grew a brain. Never got an ego. Hard to say what he gets paid—it’s in the multiples of millions, for sure, and if you add that up over a period of decades, he’s not hurting.

Pat Sajak gets to be the greatest game show host in history. Which is not bad! I would take that.

I would also take being the best James Bond in history.

Let’s all tip our caps to Pat Sajak, who intuitively knows what many of us need to learn:

You never screw up a good thing.

The Finance Angle

Don’t worry, there’s a Wall Street angle here. I’ve seen it many times before, people who fly a little close to the sun. That holds true from a personal perspective—with money comes all kinds of ways to screw up your life—but also from an investment perspective.

You have a skill, you have an edge, you are good at doing your thing, you make a comfortable living doing it—so you try to scale the strategy and attract all kinds of assets—and you find that running billions of dollars is a different (and harder) game than running millions of dollars.

Also for day traders. I know guys who make a comfortable living scalping one-lots and five-lots of futures, but it doesn’t scale to 10-lots or 20-lots.

Or you go outside your mandate. You are a distressed/event-driven/macro guy by trade, so you branch out into single-name long/short. Doesn’t end well.

It takes a little wisdom to figure out which ambitions are realistic and which are delusions of grandeur. I’d like to have more subscribers, but I’m also conscious of the fact that I have a pretty good thing going, and I spend a lot of time thinking about how not to screw it up.

Some people would call this gratitude. I would call this gratitude.

Daniel Craig, by way of being an annoying artistic purist, has inadvertently finagled his way into the sweetest financial deal of all time. He’d better take it. And take Rachel Weisz out to a nice dinner to celebrate, and then go home and hide his shoes under the bed.


Jared Dillian
Editor, The 10th Man

I have not posted for a while.....and this post should not surprise anyone familiar with this company.

The U.S. Commodity Futures Trading Commission (CFTC) has just issued an order against Forex Capital Markets, LLC (NASDAQ:FXCM), settling charges with the foreign exchange (FX) brokerage for $7.0 million in a civil monetary penalty for engaging in false and misleading solicitations. As such, the groups CEO Drew Niv and FXCM will be required to withdraw from CFTCs regulation, per a regulatory filing.


In particular, the CFTC Order outlined charges against Forex Capital Markets, LLC (FXCM), its parent company, FXCM Holdings, LLC (FXCM Holdings), as well as the two paramount members of the group, Drew Niv, and William Ahdout. The order found that between a period lasting from September 4, 2009 to at least 2014, FXCM engaged in false and misleading solicitations of FXCMs retail FX customers by concealing its relationship with its most important market maker.

FXCMs CEO Drew Niv at Finance Magnates 2016 London Summit



In addition, the CFTC asserted that FXCM had misrepresented that its No Dealing Desk platform had no conflicts of interest with its customers FXCM, FXCM Holdings, and CEO Drew Niv were collectively responsible for FXCM making false statements to the National Futures Association (NFA) about its relationship with the market maker.

Consequently, a collective $7 million civil monetary penalty was levied as well as a cease and desist order from further violations of the Commodity Exchange Act and CFTC Regulations. Furthermore, FXCM, Mr. Niv, and Mr. Ahdout agreed to withdraw from CFTC registration, never to seek to register with the CFTC. Per the order and subsequent settlement, FXCM did not admit nor deny the charges.

FXCM is currently the largest Retail Foreign Exchange Dealer (RFED) in the US, with an estimated market share of approximately 34.0% in December. It is unclear what the fallout will presently be for the US FX market following the CFTC order. The shakeup could prompt a Jefferies/Leucadia takeover, given the companys existing financial obligations and past deal with Leucadia in the aftermath of the Swiss National Bank (SNB) crisis.

The news also comes during after hours trading in the US prior to the enforcement action, FXCMs share prices (NASDAQ:FXCM) had already been trading in range of its 52-week low of $6.65, having closed at $6.85 Monday.

According to Gretchen L. Lowe, Principal Deputy Director and Chief Counsel of the CFTCs Division of Enforcement, in a recent statement on the order, Full and truthful disclosure to customers and honest discourse with self-regulatory organizations such as NFA are vital to the integrity and oversight of our markets. Todays actions demonstrates that the CFTC is committed to protecting customers from harm in the markets it regulates.


Permanent NFA Ban Given

Following the CFTC order, the National Futures Association (NFA) also stipulated that the groups founders William Ahdout and Dror (Drew) Niv as well as FXCM have been forced to withdraw from NFA membership, also facing a permanent ban. The effective date for these actions is February 21, 2017. The NFA has accepted the settlement offer of FXCM, and the aforementioned individuals neither admitted nor denied the allegations outlined in the order.

Following our earlier report that New York based retail forex broker FXCM Inc (NASDAQ:FXCM) had been banned from the US market (alongside bans for CEO Drew Niv and co-founder William Adhout) after FXCM settled allegations of defrauding customers regarding its market making activities, FXCM has put out a statement confirming the settlement with US regulators CFTC and NFA.

FXCM also gave more details as to what will happen to its US customers.

FXCM reported that it had come to an agreement with rival Gain Capital Holdings Inc (NYSE:GCAP), for Gain to purchase FXCM’s US customer accounts and integrate them into Gain’s existing retail Forex.com and institutional GTX brands.

No monetary details of the agreement with Gain Capital was given, other than to note that FXCM’s US customers generated $48 million of Revenue for the company in 2016, which we estimate to be about 18% of FXCM’s overall Revenues. And, that FXCM lost money on those customers.

There is a silver lining in all this for FXCM and its shareholders. FXCM stated that with the sale proceeds it receives from Gain Capital, plus the $52 million in regulatory freed up by exiting the US market, it will be able to expedite the paydown of its high interest loan from Leucadia National Corp (NYSE:LUK).
It will be interesting to see how FXCM shares trade when US markets open on Tuesday. Beyond the damage caused by the settlement and the reputational damage to FXCM of the CFTC and NFA’s allegation of massive fraud, the question in many investors’ minds will be: Will other national regulators (such as in the UK) follow suit if FXCM’s market making actions were similar in those jurisdictions?

FXCM put out the following press release on the matter:

February 6, 2017

FXCM US Reaches Settlement with NFA and CFTC
FXCM to Exit the U.S.
Sells Accounts to GAIN
FXCM to Pay down Loan

NEW YORK, February 6, 2017– FXCM Inc. (NASDAQ:FXCM) (“FXCM”) today announced simultaneous regulatory settlements with the National Futures Association (“NFA”) and the Commodity Futures Trading Commission (“CFTC”) against its U.S. subsidiary, Forex Capital Markets LLC and certain of its principals. FXCM Holdings, LLC was also named in the CFTC settlement. The named FXCM entities and principals neither admit nor deny the allegations associated with the settlements. The NFA settlement has no monetary fine, and the CFTC settlement has a $7 million fine.

FXCM will be withdrawing from business in the U.S. and has signed a non-binding letter of intent with GAIN Capital Holdings, Inc. (“GAIN”) under which GAIN would purchase FXCM’s U.S. customer accounts. The transaction is subject to regulatory approval and a definitive agreement. FXCM and GAIN are working to determine the timing for the account transfer and expect to provide further information in that regard in the coming days. In 2016, FXCM’s U.S. business had unaudited net revenues of approximately $48 million and generated an EBITDA loss, but the costs associated with the business will not be transferring to GAIN. There will be no changes to FXCM customers outside of the United States.

Withdrawing from this business will free approximately $52 million in capital. Proceeds from the account sale and the release of capital will go toward the further repaying of FXCM’s loan from Leucadia National Corporation.

FXCM will for the interim period continue to service its U.S. customers and to provide top quality trade execution pending the customer-account sale and business withdrawal.

FXCM will also be working diligently to be sure that an account transition to GAIN’s retail brand, FOREX.com, will be orderly, expeditious and seamless.

FXCM wants to express its most sincere thanks to those U.S. customers who have been with FXCM over the years and wish you all the best of luck following this transition.

FXCM wants to stress that these settlements have no impact on any customer of FXCM’s global businesses. FXCM and its global subsidiaries will continue to provide excellent execution and competitive pricing to its customers overseas through its award-winning technology, customer service and trading tools.


Good Riddance

FXCM lays off 150 employees and redoes Leucadia agreement in wake of US market exit:



Continuing the amazing drama in the wake of the ban of retail forex broker FXCM Inc (NASDAQ:FXCM) and its CEO Drew Niv from the US FX market, and the subsequent sale of FXCM’s US clients to rival Gain Capital Holdings Inc (NYSE:GCAP), LeapRate has learned that FXCM has made filings with US regulators that it plans to terminate about 150 employees.

The 150 employees represent about 18% of FXCM’s global workforce of more than 800.

The layoffs at FXCM should not really come as a big surprise. In the FXCM press release made yesterday, the company indicated that it would not be transferring any costs (i.e. employees) to Gain Capital as part of the sale of its US clients to its rival.

We believe that many if not most of the layoffs come from FXCM’s accounting and compliance operations. Running a regulated US brokerage requires a fairly large team to deal with the multitude of complex filings which much be made, some on a daily basis, to US regulators. Those people will not be needed as FXCM exits the US forex market.

FXCM also indicated that it had reworked some aspects of its agreement with Leucadia National Corp (NYSE:LUK). Among the changes were more powers given to Leucadia to terminate for any reason the new bonus structure the company introduced last year for senior management, incentivizing FXCM senior management for paying down the company’s loan from Leudcadia.

The text of FXCM’s filing with the US Securities and Exchange Commission (SEC) reads as follows:

Item 1.01 Entry into Material Definitive Agreement

Settlement Agreements

On February 6, 2017, FXCM Inc. (the “Company”) announced simultaneous regulatory settlements with the National Futures Association (the “NFA”) and the Commodity Futures Trading Commission (“CFTC”) against its U.S. subsidiary, Forex Capital Markets LLC, FXCM Holdings, LLC (“Holdings”) and certain of its principals. The named FXCM entities and principals neither admit nor deny the allegations associated with the settlements. The NFA settlement has no monetary fine, and the CFTC settlement includes a $7 million fine.

Pursuant to the settlement agreements, the Company will be withdrawing from business in the United States. Withdrawing from this business will free capital that will be used to repay a portion of the outstanding loan from Leucadia National Corporation (“Leucadia”) to the Company. Proceeds from the account sale also would be used to repay the loan from Leucadia.

Amendment to Management Agreement

On February 2, 2017, each of FXCM Group, LLC (“Group”), FXCM Holdings, LLC, and LUK-FX Holdings, LLC (“Leucadia”) entered into Amendment No. 1 to the Management Agreement of FXCM Group, LLC (the “Management Agreement Amendment”), which amended that certain Management Agreement between FXCM Holdings, LLC and FXCM Group, LLC, dated as of September 1, 2016 (the “Management Agreement”), which was disclosed in the Company’s Current Report on Form 8-K filed with the SEC on September 8, 2016.

Pursuant to the Management Agreement Amendment, the Management Agreement was modified to provide Board Members (as defined therein) with certain rights of termination. Specifically, the Management Agreement Amendment specifies that the Management Agreement may now be terminated by a vote of at least three (3) members of the Group Board after the occurrence of certain events, including a change of control.

Acknowledgment Regarding Bonus Plan

On February 2, 2017, Group and Leucadia also entered into an acknowledgment (the “Acknowledgment”), as it relates to that certain FXCM Group, LLC 2016 Incentive Bonus Plan for Founders and Executives, effective September 1, 2016 (the “Plan”), which was disclosed in the Company’s Current Report on Form 8-K filed with the SEC on September 8, 2016.

Pursuant to the Acknowledgment, each of the Group and Leucadia agreed that, notwithstanding anything to the contrary in the Plan, Leucadia may terminate the Plan on behalf of Group at any time and for any reason in its sole discretion.

Item 2.02 Results of Operations and Financial Condition

The settlement referred to under Item 1.01 will be reflected in the Company’s results for the year ended December 31, 2016. The restructuring referred to under Item 2.05 will be reflected in the Company’s results for the three months ended March 31, 2017 . The Company’s U.S. business had unaudited 2016 net revenues of approximately $48 million and generated an EBITDA loss, but the costs associated with the business will not be transferring to GAIN. Withdrawing from this business will free approximately $52 million in capital.

A copy of the press release announcing the settlements with the NFA and the CFTC are furnished herewith as Exhibit 99.1.

Pursuant to general instruction B.2 to Form 8-K, the information furnished pursuant to this Item 2.02, including Exhibit 99.1, shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section. The information in this Item 2.02, including Exhibit 99.1, shall not be incorporated by reference into any filing or other document pursuant to the Securities Act of 1933, as amended (the “Securities Act”), except as shall be expressly set forth by specific reference in such filing or document.

Item 2.05 Costs Associated with Exit or Disposal Activities

The information set forth in Item 1.01 of this Current Report on Form 8-K is incorporated by reference into this Item 2.05.
In connection with its withdrawal from business in the United States pursuant to the settlement agreements with the NFA and the CFTC, the Company intends to implement a restructuring plan that includes the termination of approximately 150 employees, which represents approximately 18% of its global workforce. The Company expects to recognize most of these pre-tax restructuring charges in the three months ending March 31, 2017 and potentially in subsequent quarters.
Amounts related to this action are still being calculated and will be provided via an amendment to this Current Report on Form 8-K. Additional details will be provided in the Company’s Form 10-K for the year ended December 31, 2016.


Personal Opinion: The two individuals who are now disbarred by CFTC to operate their company within US territory are guilty of fraud. Anyone who has stolen as much money as these individuals would be in court of law, in shackles.....What has happened to all the regulations we have been subjected to as traders, as companies, yet, year in, year out, this company violated laws, fined and sent on their way, still operating, still defrauding TRADERS. People associated with this company have lose all credibility, this forum has seen their hired hands at work alongside the two individuals always re-assuring possible clients (Victims) of this companies honesty. It is grand lie, followed by more lies, fines and fraud.....all it takes is two current clients to file complaints at their local Attorney Generals office to follow with class action against the now defunct company.

Clients who have not agreed to be sold to Gain Capital, should be requesting their funds returned...it is illegal for this company to sell client accounts previous to any agreement with the client.

Where The Wild Flows Are: Equity Funds See Largest Inflow In 13 Weeks Before Fed

Theres been no shortage of discussion this year about flows into US equities.

Over the past several weeks, more than a few commentators have suggested that the flood of Johnnycomelately retail money into stocks may be proof that they do in fact ring bells at the top.

Of course these flows have been catalyzed and perpetuated by the Trump trade meme. Headlines advertising the Trump rally and Dow 20,000 have been plastered across every newspaper in the country, fueling retail demand and ensuring that as is almost always the case, mom and pop are buying when multiples are stretched and are thus almost sure to be underwater in the medium- to near-term as the market finally corrects.

Well, for those interested, below find a few charts from Deutsche Bank which, to borrow from Maurice Sendak, show you where the wild flows are

Via Deutsche Bank

As shown below, US equity funds accumulated $55 billion of inflows over the past twelve months ( $100 billion since November alone)
https://heisenbergreport.files.wordp...lows.png?w=700

Last week, DM equity funds (+) with US & Japan (+) vs. Europe (-): DM equity funds rose to their highest level in the past 13 weeks (+0.2%, MFs: -0.1%, ETFs: +0.7%) as significant ETF inflows outweighed MF redemptions

https://heisenbergreport.files.wordp...ties.png?w=700

https://heisenbergreport.files.wordp...wsdb.png?w=700

So as noted, those weekly flows were before the Fed.

It'll be interesting to see what the lagged numbers look like this week.

Authored by: therealheisenberg

Annual Portfolio Results : 2017

There is no intent of solicitation.

Monday, July 17, 2017 (Historical Comparison)

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Sunday, December 31, 2017 (Annual Results)
DowJones - 30 components
Weekly - (0.48%)
Annual - 21.97%
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S&P500 - 500 components
Weekly - (0.52%)
Annual - 17.31%
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Nasdaq - 3029 components
Weekly - (0.67%)
Annual - 27.19%
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Forex : 2017

ActiveManagement
Gold, Platinum, Silver, Copper included

Account : 48.6% (13HStatus)

--------------------------------

StockPortfolio (ValueInvestor)
ActiveManagement - PortfolioPerformance (Costs/Commissions deducted)
PortfolioA - 49 Components
Weekly - 0.66%
Annual - 135.77%
--------------------------------
PortfolioB - 22 components
Weekly - 0.04%
Annual - 101.31%
--------------------------------
PassiveManagement - PortfolioPerformance
PortfolioG - 48 components
Weekly - 0.20%
Annual - 29.90%
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IndustrySector - Weight %
Oil & Gas................................1
Basic Materials.......................2
Industrials...............................3
Consumer Goods....................34
Health Care.............................5
Consumer Services.................21
Telecommunications...............1
Utilities...................................1
Financial's...............................7
Technology..............................3
Other........................................3
Bonds......................................8
Cash........................................11
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SecurityType - Weight %
Stock................................65
Closed End Funds............0
ETFs................................28
Other.................................0
Cash..................................7
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Asset Classes - Weight %
Alternatives......................2
International Equity.........10
US Small Cap..................2
US Large Cap..................69
Other................................2
Bonds...............................9
Cash.................................6
==============================================================
There is no intent of solicitation.
I am sharing my portfolio results, background has impact upon my returns. Individuals who desire to managed their own retirement, trade or both may accomplish similar results.

I trade from my home office, manage my account(s) at interactive brokers, data is delivered by DTN and Sierra Charts data feeds through dedicated lease line and fiber optics. Charting is provided by Sierra Charts and Wave59 Pro.

Analysis light : GoogleSheets : Analysis heavy : WolfRam

In order of influence (Confluence)
Ichimoku Kinkō Hyō, supply and demand, fibonacci time and price extension, and harmonic patterns.

[Advanced certificates in Excel, Elliot Wave Theory Certification, >10 yrs. W.D. Gann - Implement Ganns technique "YES", the study of Gann opens up a Pandora’s Box full of esoteric mysteries, knowledge empowers]

Usque ad finem anni

Longa vita, salutem et felicitatem
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